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Comment by Nickste | Hacker News Reader

The model 3 is estimated to have a 30% gross margin [1]. So it seems incorrect to say that the traditional manufacturers are waiting for battery prices to fall, as it’s clearly possible to build a high margin EV today.

[1] https://jalopnik.com/engineering-firm-that-said-tesla-model-...

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It's profitable is you remove management, R&D, supercharger and sales costs. Which is like saying that Uber is profitable if it's not for driver compensations.

no that's non sense. R&D is a huge fixed upfront cost while Uber's drivers are an ongoing cost that scales linearly. Just like Intel (huge upfront cost to design chips) VS Victoria's Secret , the former has unlimited upside, the latter doesn't and cost scales linearly.

in the car industry where R&D is largely incremental this doesn't really apply. the research costs in the automotive industry aren't fixed, it's billions after billions year after year to stay competitive, it's not like you build the car platform and then infinite cars start rolling off the conveyor belt. Which is why large car companies don't have the margins of facebook and why many of them are a hundred years old rather than ten like your average software company.

Which is why I said gross margin. And isn’t the point that traditional manufacturers like BMW are also going to have to invest in similar levels of R&D, superchargers, and sales cost? Except they’re 10 years behind.

An important difference: Tesla can produce all their own batteries, and none of the competitors are even close to Tesla's production levels. So Tesla gets better batteries for cheaper.

Panasonic actually makes all of Tesla's batteries currently.

Panasonic makes the battery cells. Tesla builds them into the battery pack that goes into the final products. And this happens under the same roof, and the cell design is a joint venture. Tesla's battery cell manufacturing far from a black-box process where Tesla wrote a check and a third party delivers battery cells with no other involvement.

It’s a partnership right? Not the same as calling up a batter vender in the phone and asking for wholesale price.

>The model 3 is estimated to have a 30% gross margin

And yet Tesla is always on the verge of shutting down due to lack of funds, so the gross margin doesn't tell the whole story...

Tesla has $4B in the bank and their debt levels are tiny compared to VW, Toyota and Ford.

2018 VW made a profit of about 17.7 billion Euro while Tesla lost ~1 billion dollars. Comparing debt alone is a very stupid metric.

That’s non-GAAP. Google says VW 2018 profit was actually. €13.92 billion, on revenue of €235 billion.

Most of that difference was due to €3 billion in fines for lying about the level of toxic emissions of their Diesel engines.

Apparently they feel like that shouldn’t fully count against them in their annual report. [1] Maybe a company which has demonstrated it is willing to commit fraud to coverup its level of pollution shouldn’t be able to call the fines “one-time” charges, since the likelihood of recidivism is high.

VW shipped 10.8 million vehicles to Tesla’s 245k. So to be sure, Tesla is currently about 2% the size of VW.

[1] - https://annualreport2018.volkswagenag.com/

And if sales halved? 2008 took out 2 of the big 3; which companies would a similar recession in 2020 take out? Tesla would be vulnerable, but far from alone.

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